Contrarians interpret a high cash ratio in mutual funds at market lows as an indication that the mutual fund managers are:
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A. B. C. D.D
According to the contrarians, most market participants make wrong investment decisions as the market approaches the peak or trough in a cycle.
One category of market participants they consider is mutual funds. The cash ratio of mutual funds is the fraction of total assets that mutual funds maintain in the form of cash. A high ratio (around 12-13%) at a market low is considered by contrarians as a signal that the funds are bearish and a low ratio (7-8%) at a market high is interpreted as an indication that the funds are bullish. The Contrarians then take exactly the opposite position